Pension sell-offs will leave empty pots

Ever-larger companies selling off their pension schemes will leave "a whole generation with very little for retirment", an IFA has claimed.

A report into pension scheme buyouts by financial consultants Lane Clark & Peacock last week warned it was "inevitable" a FTSE 100 company would sell soon.

And it showed business bought up between last September and 31 March was £4.1bn, up from just £0.6bn in the previous six months.

The report stated: "The UK pension buyout market currently comprises eleven insurance companies that are actively competing to take on investment and longevity risks from pension schemes in return for a premium. Nine of these companies entered the market during the past two years.

And LCP partner Clive Wellsteed added the surge in buyout activity in the past six months as "part of a growing trend".

But Christopher Wicks, an adviser with Manchester-based M-trust Ltd, said this development would see employers paying less into schemes.

"The cost is disproportionate to the cash outlay and time spent administrating them," he said. "Most employers are looking to get shot of them.

"What it actually means is that whole generations will be left with very little for retirement. Defined benefit schemes underwitten by the employer tend to be replaced with defined contribution schemes and the level of those contributions tends to be much lower."